Use the information below to answer the next three questions and provide solutio

Question

Use the information below to answer the next three questions and provide solutions for each of them in details:

1. Use the information above to calculate the correlation between Ford and GM ?

2. Use the information above to calculate the correlation between Ford and index?

3. Use the information above to calculate the correlation between GM and index?

SECURITY STANDARD DEVIATION VARIANCE FORD 25 625 GM 35 1225 INDEX S&P 500 30 900 COVARIANCE Ford with the S&P 600 GM with the S&P 612.50 Ford with GM 845

Explanation / Answer

Answer ) Correlation = Covariance (X.Y)/ (St. deviation X * St. deviation Y )

1) Correlation Ford & GM = 845 / (25*35) = 0.965714

2) Correlation Ford & Index = 600 / (30*25) =0.80

3) Correlation GM & Index = 612.5 / (30*35) = 0.58333

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